Cash Flow

What is cash flow?

It's the measure of the cash or near-cash moving into and out of a business. Cash flow is how seamlessly monies flow in and out – any delays or blockages and a business may not stay solvent.

Where have you heard about cash flow?

Cash flow makes the news when a company is facing liquidity problems that threaten its future. More positively, it may be mentioned in financial reports about businesses such as pubs or betting shops which have strong cash flow.

What you need to know about cash flow...

Cash flow is a measure of how well a company turns what it's owed by its customers into 'real money'.

Investors study cash flow to see how robust a company would be in the event of a downturn or an unexpected drain on resources.
Without a strong liquidity position (good cash flow), a business might not be able to meet its day-to-day running costs without relying on loans. Cash flow minus capital expenditure is called 'free cash flow'.